October 30, 2007

Risk Transfer and Furniture: Betting Against the Red Sox

Jordan's Furniture is a legendary Boston area retailer of furniture. They generate a carnival atmosphere in their theme-based stores. One involves a replication of Bourbon Street in New Orleans, complete with piped in Jazz. They will do anything - anything! - to get you to buy furniture.

Back in March, they tantalized Red Sox fans with a unique proposition: buy furniture between March 7 and April 16, and if the Red Sox win the World Series, you get all your money back. Well, there are thousands of fans in the Boston area with two reasons to celebrate the recent success of the Sox.

Eliot Tatelman, co-founder of the company with his brother Barry, will not disclose the amount of money being refunded to customers. He teases us with averages: there were about 30,000 purchases made during the promotion period. If they averaged $1,000 each, the total is somewhere around $30 million. Heck, that's enough to pay one year of Yankee third baseman Alex Rodriguez's salary!

Tatelman, shrewd businessman that he is, has insurance to cover the losses. I would love to see that policy. I wonder how the underwriters calculated the premium. Knowing Tatelman, he chose a carrier with a New York based underwriting team, full of Yankee fans. They undoubtedly scoffed at the notion that any payouts would be needed. Tatelman probably secured very favorable terms.

Oh well, it was a great marketing ploy. It's still not clear whether the rebates will be taxable (they likely will be) or whether the entire scheme was an illegal lottery. Meanwhile, Tatelman might have to shop around a little harder if he wants to repeat the gimick next year. I suspect that the underwriters - Yankee fans or not - might not be inclined to bet against the Sox again.

Sox rule! (And tomorrow the Insider will return to its customary objectivity.)

| 3 Comments

3 Comments

Isn't Jordan's owned by Warren Buffet who own an insurance company or two?

I would love to see the faces of those involved when it was announced the Soxs had won. Im sure it was great!

It's actually not that uncommon, and it's certainly legal:

http://insureblog.blogspot.com/2006/09/quick-blip-from-p-c-world.html

What is it with furniture stores and big-deal sporting events?

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This page contains a single entry by Jon Coppelman published on October 30, 2007 11:40 AM.

News roundup: Oregon's WC success, aftermath of California's fires, and more was the previous entry in this blog.

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